Consider the following two projects:

Year Cash Flow (Beta) Cash Flow (Zeta)

0 $25,000 $28,000

1 12,000 14,000

2 10,000 13,000

3 9,000 11,000

Instructions:

1. Using company cost of capital 15%, calculate the following investment criteria for both projects:

a. Payback period

b. Net Present Value (NPV)

c. Internal Rate of Return (IRR)

d. Profitability Index (PI)

2. If projects Beta and Zeta are independent, which one(s) will you choose? Why?

3. If projects Beta and Zeta are mutually exclusive, which one will you choose? Why?